2. Investment Securities

The portfolio of investment securities consisted of the following (in thousands):

	June 30, 2014
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Available-for-sale:
U.S. Government sponsored enterprises	$	11,201	$	1	$	111	$	11,091
Obligations of state and political subdivisions		50,581		2,046		54		52,573
GSE mortgage-backed securities		114,947		3,146		621		117,472
Collateralized mortgage obligations: residential		68,193		354		2,083		66,464
Collateralized mortgage obligations: commercial		26,731		388		101		27,018
Other asset-backed securities		24,681		404		-		25,085
Collateralized debt obligation		464		861		-		1,325
	$	296,798	$	7,200	$	2,970	$	301,028

	December 31, 2013
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Available-for-sale:
U.S. Government sponsored enterprises	$	11,455	$	1	$	191	$	11,265
Obligations of state and political subdivisions		57,925		2,296		243		59,978
GSE mortgage-backed securities		146,129		2,029		2,193		145,965
Collateralized mortgage obligations: residential		73,569		212		2,894		70,887
Collateralized mortgage obligations: commercial		27,082		416		152		27,346
Other asset-backed securities		25,204		351		66		25,489
Collateralized debt obligation		464		271		-		735
	$	341,828	$	5,576	$	5,739	$	341,665

	June 30, 2014
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Held-to-maturity:
Obligations of state and political subdivisions	$	46,804	$	97	$	679	$	46,222
GSE mortgage-backed securities		73,054		977		321		73,710
Collateralized mortgage obligations: residential		13,515		-		520		12,995
Collateralized mortgage obligations: commercial		15,554		78		-		15,632
	$	148,927	$	1,152	$	1,520	$	148,559

	December 31, 2013
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Held-to-maturity:
Obligations of state and political subdivisions	$	47,377	$	38	$	2,586	$	44,829
GSE mortgage-backed securities		78,272		148		1,079		77,341
Collateralized mortgage obligations: residential		14,189		-		979		13,210
Collateralized mortgage obligations: commercial		15,685		103		-		15,788
	$	155,523	$	289	$	4,644	$	151,168

With the exception of three private-label collateralized mortgage obligations (“CMOs”) with a combined balance remaining of $53,000 at June 30, 2014, all of the Company’s CMOs are government-sponsored enterprise (“GSE”) securities.

The amortized cost and fair value of debt securities at June 30, 2014 by contractual maturity are shown in the following table (in thousands) with the exception of other asset-backed securities, mortgage-backed securities, CMOs, and the collateralized debt obligation. Expected maturities may differ from contractual maturities for mortgage-backed securities and CMOs because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	Amortized Cost		Fair Value
Available-for-sale:
Due in one year or less	$	10,544	$	10,705
Due after one year through five years		33,691		34,681
Due after five years through ten years		12,376		13,116
Due after ten years		5,171		5,162
Other asset-backed securities		24,681		25,085
Mortgage-backed securities and collateralized mortgage obligations:
Residential		183,140		183,936
Commercial		26,731		27,018
Collateralized debt obligation		464		1,325
	$	296,798	$	301,028

	Amortized Cost		Fair Value
Held-to-maturity:
Due in one year or less	$	107	$	105
Due after one year through five years		2,639		2,659
Due after five years through ten years		6,910		6,831
Due after ten years		37,148		36,627
Mortgage-backed securities and collateralized mortgage obligations:
Residential		86,569		86,705
Commercial		15,554		15,632
	$	148,927	$	148,559

Details concerning investment securities with unrealized losses are as follows (in thousands):

	June 30, 2014
	Securities with losses under 12 months				Securities with losses over 12 months				Total
	Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss
Available-for-sale:
U.S. Government sponsored enterprises	$	-	$	-	$	10,386	$	111	$	10,386	$	111
Obligations of state and political subdivisions		656		5		3,726		49		4,382		54
GSE mortgage-backed securities		3,662		13		40,979		608		44,641		621
Collateralized mortgage obligations: residential		4,730		17		45,254		2,066		49,984		2,083
Collateralized mortgage obligations: commercial		-		-		4,097		101		4,097		101
	$	9,048	$	35	$	104,442	$	2,935	$	113,490	$	2,970

	December 31, 2013
	Securities with losses under 12 months				Securities with losses over 12 months				Total
	Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss
Available-for-sale:
U.S. Government sponsored enterprises	$	10,463	$	191	$	-	$	-	$	10,463	$	191
Obligations of state and political subdivisions		4,256		243		-		-		4,256		243
GSE mortgage-backed securities		68,028		2,193		-		-		68,028		2,193
Collateralized mortgage obligations: residential		56,975		2,563		4,371		331		61,346		2,894
Collateralized mortgage obligations: commercial		4,282		152		-		-		4,282		152
Other asset-backed securities		13,099		66		-		-		13,099		66
	$	157,103	$	5,408	$	4,371	$	331	$	161,474	$	5,739

	June 30, 2014
	Securities with losses under 12 months				Securities with losses over 12 months				Total
	Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss
Held-to-maturity:
Obligations of state and political subdivisions	$	7,816	$	59	$	29,812	$	620	$	37,628	$	679
GSE mortgage-backed securities		-		-		29,908		321		29,908		321
Collateralized mortgage obligations: residential		-		-		12,995		520		12,995		520
	$	7,816	$	59	$	72,715	$	1,461	$	80,531	$	1,520

	December 31, 2013
	Securities with losses under 12 months				Securities with losses over 12 months				Total
	Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss
Held-to-maturity:
Obligations of state and political subdivisions	$	42,246	$	2,569	$	685	$	17	$	42,931	$	2,586
GSE mortgage-backed securities		31,042		1,079		-		-		31,042		1,079
Collateralized mortgage obligations: residential		13,210		979		-		-		13,210		979
	$	86,498	$	4,627	$	685	$	17	$	87,183	$	4,644

Management evaluates each quarter whether unrealized losses on securities represent impairment that is other than temporary. For debt securities, the Company considers its intent to sell the securities or if it is more likely than not the Company will be required to sell the securities. If such impairment is identified, based upon the intent to sell or the more likely than not threshold, the carrying amount of the security is reduced to fair value with a charge to earnings. Upon the result of the aforementioned review, management then reviews for potential other than temporary impairment based upon other qualitative factors. In making this evaluation, management considers changes in market rates relative to those available when the security was acquired, changes in market expectations about the timing of cash flows from securities that can be prepaid, performance of the debt security, and changes in the market’s perception of the issuer’s financial health and the security’s credit quality. If determined that a debt security has incurred other than temporary impairment, then the amount of the credit related impairment is determined. If a credit loss is evident, the amount of the credit loss is charged to earnings and the non-credit related impairment is recognized through other comprehensive income.

As of June 30, 2014, 90 securities had unrealized losses totaling 2.26% of the individual securities’ amortized cost basis and 1.01% of the Company’s total amortized cost basis. 70 of the 90 securities had been in an unrealized loss position for over twelve months at June 30, 2014. These 70 securities had an amortized cost basis and unrealized loss of $181.6 million and $4.5 million, respectively. The unrealized losses on debt securities at June 30, 2014 resulted from changing market interest rates over the yields available at the time the underlying securities were purchased. Management identified no impairment related to credit quality. At June 30, 2014, management had the intent and ability to hold impaired securities and no impairment was evaluated as other than temporary. As a result, no other than temporary impairment losses were recognized during the six months ended June 30, 2014.

During the six months ended June 30, 2014, the Company sold four securities classified as available-for-sale at a net gain of $128,000. All of the securities were sold at a gain. During the six months ended June 30, 2013, the Company sold 21 securities classified as available-for-sale at a net gain of $204,000. Of the 21 securities sold, 18 securities were sold with gains totaling $217,000 and three securities were sold at a loss of $13,000.

Securities with an aggregate carrying value of approximately $283.3 million and $259.9 million at June 30, 2014 and December 31, 2013, respectively, were pledged to secure public funds on deposit and for other purposes required or permitted by law.